Instructor: Marco Del Negro
Economia V, Spring 2000

PROBLEM SET 1, SOLUTIONS

1) a) Product Approach: $ 1 gas station value added = $ 14 product - $13 value product produced previous year
Expenditure approach: $14 consumption spending- $13 inventory investment.
Income approach: $1 paid to factors of production
b) Product:$60K broker´s fee.
Expenditure: $60 residential investment home buyer
Income: $60k broker´s fees.
c) Product: $ 20k salary + $8 k Child care.
Expenditure: $ 28 k salary + child care.
Income: $20 compensation home maker
$8k factors of childcare production
d) Product: $ 100 million capital good.
Expenditure: $10 million net exports.
Income: $ 100 million to US factors of production.
e) Product: $ 0 nothing produced.
Expenditure: $ 0 transfer.
income: $ 0 not a payment to production factor.
f) Product: $ 5 k advertising services.
Expenditure: $ 5 k gvmt. expenditures.
income: $ 5 k compensation employees.
g) Product: $ 100 MM new cars + $20 MM sales services.
Expenditure: $ 100 MM Hertz investment + $60 MM. consumption- $40 MM. investment goods sold by Hertz.
Income: $ 100 MM. factors of production GM.+ $ 20 factors of production consortium. 2) Problem 4 pag 57.
GNP= 1000 A) s= 1- CA
Govt. Purchases= 200 s-1 = CA
Govt. deficit= 50 s-1 = NFP+ NX
Nat. savings= 200 200-150=25+ NX
Investment=150 NX= 25
NFP=25
c) GDP= C+I+G+NX B) GDP= GNP-NFP
975= C+150+200+25 GDP=1000-25
C= 600 GDP= 975
D) Sn= Sp + Sg E) PDI (Disposable Income)= GNP-T+TR+INT
200= Sp-50 Sg= T-(G+TR+INT)
Sp=250 -sg-G= TR+INT-T
-50-200= TR+INT-T
-150= TR+INT-T
PDI= 1000-150=850